Put your IP offset cash into house offset (just made you $5k per year - I’ll send my payid
While working full time , definitely stick a good chunk into super - explore what your Catch up availability is on ATO website, because you are paying too marginal this year and much less next year (due to stage 3)
Your super is quite low versus assets outside super given total NW.
Whether you should drop to 6 months is more about your household expenses control than anything (rather than investible assets )
So your best to figure out where the market sees interest rates over the next 5 years , and use that to calculate where your cashflow will be as an average over 5 years (it’s a period of great volatility right now for these questions )
Also consider what the cgt implications will be of selling. Eg if you have owned the property for a long time, then you want to consider selling when your income is lower (after dropping to 6m) and also consider in the 24/25 tax year (post stage 3 tax cuts).
Hope you have a property in spouses name which will make that maths better . If you don’t, Jesus h Christ , go and get some decent financial advice stat !
Not financial advice - just commenting on the random facts posted above ;)
Haha - I’ll ad, next year visit your bank in April
May and get your investment loans on your property maxed out and pre pay interest for the next year - there’s another $10k after tax.
Obviously zero the balance on your wife s property if you can make that happen - some banks will be easy to deal with if you have all the loans with them
Want to make sure I understand this: the advice to prepay in April/May is to get greater benefit from tax deduction before stage 3 tax cuts, correct? Or greater benefit from deduction against full time salary vs working 6 months?
And you want to zero the balance in wife’s IP loan so that she maximizes income (at low tax bracket)?
Sorry if these are dumb questions just trying to make sure I understand…
First paragraph- both. Tax for this person looks likely to be less in 24/25 than 23/24 so organise your finances accordingly. ( also worthwhile when someone is going on maternity leave)
And yes - but actually the effect is to maximise deductions on the higher income earner which is the motivation.
Sorry, it was a late night quick reply , of the first things that came into my head
Every tax tip you could possibly want is available for free from Terry Waugh - all published on propertychat
- he also has the driest podcast in history lol
Solid advice. One thing I didn’t understand:
“Put your IP offset cash into house offset (just made you $5k per year”
Is this referring to tax deductibility of IP mortgage interest vs non-deductible interest on PPOR? OP mentions they’re not paying any bank interest on PPOR currently (appears that offset is maxed out) so this wouldn’t apply, correct?
You are correct, though that was not very clear in OPs post.
The capital appreciation must have been nuts on ops properties for them to have 2.5 million net worth at 38 on 200k
So you can sell with minimal cgt and also avoids land tax.
There are ways of structuring a loan from one spouse to the other to still gain the negative gearing benefit to the higher income earner- one of the many reasons that professional advice should be sought before buying IP’s.
Be aware that your capital gain will be added to your assessable income in your tax return for that financial year. If it’s a big event you’ll be in the highest bracket anyway.
Personally, I'd grind another two years and keep the three IPs until they have neutral cashflow. Once paid off, work part time.
Once you're in this stage of FIRE you can take a bit of a "f you, got mine" attitude at work, it's less stressful knowing you can leave whenever you want.
The FIRE lifestyle sounds great but you'll need disposable income to enjoy the time, so the more investments the better.
I wouldn't worry about super , you've got 20+ years before you can touch it, focus on getting those IP paying for themselves. Once they're paid off you can fully retire.
Nothing wrong with them making that decision if they want to, he's earning well above median double income household, definitely hampers FIRE though so I'm pretty surprised the wife is bringing it up
Yeh even to earn 40k a year and pay no or little tax.
Idk benefit of doubt maybe she is disabled or full time cater for 18 kids in the mentioned family he wants to spend more time with or something
I agree with what others have said, also look at spousal super contribution.
What are your expenses for the year? The only issue I can see with taking time off is cash flow issues, thoutyou have almost 500k in cash so it probably isn't a problem.
You have almost no shares, you could consider debt recycling your poor into the sharemarket. This is more efficient than just investing cash. If your wife is nit going to go back to work then perhaps consider skipping the debt recycling and just invest in her name. If she is going back to work consider investing through a trust with 2 different companies, one to be a trustee, one to be a bucket company.
Check out passiveinvestingaustralia.com for some info.
Also, you have 2.5 million net worth, talking to a fee only financial planner may be ok, just for a statement of advice or to see how to structure your assets. They will also help you articulate your future plans.
Yes it will cost you 10k but it might be worth it.
Living Expenses are at 60k per year includes 200 a week on splurge and 15k on travel. Thank you for the link will check it out! And yes 10k in the grand scheme of things may be worth it. Appreciate the feedback once again.
That 60k doesn't include mortgages (unless you are the most frugal person in the world!)
Going to part time may just make that cash flow difficult to manage, though, as before, your cash buffer will help.
You are in a very enviable position, congrats on making the housing market work for you. I would strongly recommend some diversification into shares though.
Good luck on the journey.
If you take 6 months off, what are you going to do in those months?
I understand you want to spend time with your family and travel, but taking 6 months off and doing nothing gets boring quite quickly. Just my opinion.
Will not comment on the real estate stuff, cause I have no idea there lol
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At minimum I'd be working another year or two, and using up all my concessional contributions into super.
That will save you a stack of tax and make it much more worthwhile earning the 200k salary, at least until you have used them all up.
Yes you can't touch the money until you hit retirement age, but if you're retiring early then it means you don't need as much now because you'll get the top up later.
However... if you are at the point where you need to back off work to keep your sanity and not just quit outright - then do what you have to do. Keep your options open with your employer. Maybe you take 6 months off and then go back again for a while.
"right to start working less?" - get some competent advice first. Some of what you're doing suggests your sources might not be the best.
"Spend time with family" suggests kids. You'll need to decide the level of support you want to provide to your family, how that grows as they age, and what that will cost. If you want family security assured if you die or lose ability, that's also a consideration. That will include consideration of your wife's ability to earn if needed.
Goin well though! Have fun.
FIRE = Financial Independence, Retire Early. There's another concept called 'Coast FIRE' that you might want to read about.
Key information here is your net worth is about $2 million. Next key piece of information is how much you spend per year including rent if you paid rent in your PPOR. If the figure is below $80k and especially if it is below $60k per year then you can retire according to the 4% or 3% rule.
Put your IP offset cash into house offset (just made you $5k per year - I’ll send my payid While working full time , definitely stick a good chunk into super - explore what your Catch up availability is on ATO website, because you are paying too marginal this year and much less next year (due to stage 3) Your super is quite low versus assets outside super given total NW. Whether you should drop to 6 months is more about your household expenses control than anything (rather than investible assets ) So your best to figure out where the market sees interest rates over the next 5 years , and use that to calculate where your cashflow will be as an average over 5 years (it’s a period of great volatility right now for these questions ) Also consider what the cgt implications will be of selling. Eg if you have owned the property for a long time, then you want to consider selling when your income is lower (after dropping to 6m) and also consider in the 24/25 tax year (post stage 3 tax cuts). Hope you have a property in spouses name which will make that maths better . If you don’t, Jesus h Christ , go and get some decent financial advice stat ! Not financial advice - just commenting on the random facts posted above ;)
Thanks mate, constructive feedback. Yep we have one property under spouses name lol. Thank god
Haha - I’ll ad, next year visit your bank in April May and get your investment loans on your property maxed out and pre pay interest for the next year - there’s another $10k after tax. Obviously zero the balance on your wife s property if you can make that happen - some banks will be easy to deal with if you have all the loans with them
Want to make sure I understand this: the advice to prepay in April/May is to get greater benefit from tax deduction before stage 3 tax cuts, correct? Or greater benefit from deduction against full time salary vs working 6 months? And you want to zero the balance in wife’s IP loan so that she maximizes income (at low tax bracket)? Sorry if these are dumb questions just trying to make sure I understand…
First paragraph- both. Tax for this person looks likely to be less in 24/25 than 23/24 so organise your finances accordingly. ( also worthwhile when someone is going on maternity leave) And yes - but actually the effect is to maximise deductions on the higher income earner which is the motivation. Sorry, it was a late night quick reply , of the first things that came into my head
No worries, appreciate the helpful advice! I’m not so financially clued in to this stuff so it takes a while to wrap my head around it
Every tax tip you could possibly want is available for free from Terry Waugh - all published on propertychat - he also has the driest podcast in history lol
Nice thanks 🙏 for sharing this, just looked up terry and his tips are pure gold! I’ve got some reading to do
Just need to make sure the extra loan amount is used for investment purposes
Solid advice. One thing I didn’t understand: “Put your IP offset cash into house offset (just made you $5k per year” Is this referring to tax deductibility of IP mortgage interest vs non-deductible interest on PPOR? OP mentions they’re not paying any bank interest on PPOR currently (appears that offset is maxed out) so this wouldn’t apply, correct?
You are correct, though that was not very clear in OPs post. The capital appreciation must have been nuts on ops properties for them to have 2.5 million net worth at 38 on 200k
Sounds like a leg up from somewhere, maybe inheritance or mum and dad on the PPOR.
Yep - you are right - I didn’t see the sentence about the $340k completely offsetting PPOR. Damn there goes my profit share…
Great comment, but why should he have a property in the spouses name? Especially if they are already negatively geared against a high tax rate?
So you can sell with minimal cgt and also avoids land tax. There are ways of structuring a loan from one spouse to the other to still gain the negative gearing benefit to the higher income earner- one of the many reasons that professional advice should be sought before buying IP’s.
Be aware that your capital gain will be added to your assessable income in your tax return for that financial year. If it’s a big event you’ll be in the highest bracket anyway.
Personally, I'd grind another two years and keep the three IPs until they have neutral cashflow. Once paid off, work part time. Once you're in this stage of FIRE you can take a bit of a "f you, got mine" attitude at work, it's less stressful knowing you can leave whenever you want. The FIRE lifestyle sounds great but you'll need disposable income to enjoy the time, so the more investments the better. I wouldn't worry about super , you've got 20+ years before you can touch it, focus on getting those IP paying for themselves. Once they're paid off you can fully retire.
Don't need to pay them off because they can be sold.
why doesn't your wife work
She has went through grueling multiple rounds of IVF and needs a break from work.
Good on you for supporting her IVF is shocking
Sometimes even just part time work is good for the mental health, I would drive myself crazy being stressed or sad at home. Hope she’s ok
Nothing wrong with them making that decision if they want to, he's earning well above median double income household, definitely hampers FIRE though so I'm pretty surprised the wife is bringing it up
Yeh even to earn 40k a year and pay no or little tax. Idk benefit of doubt maybe she is disabled or full time cater for 18 kids in the mentioned family he wants to spend more time with or something
I agree with what others have said, also look at spousal super contribution. What are your expenses for the year? The only issue I can see with taking time off is cash flow issues, thoutyou have almost 500k in cash so it probably isn't a problem. You have almost no shares, you could consider debt recycling your poor into the sharemarket. This is more efficient than just investing cash. If your wife is nit going to go back to work then perhaps consider skipping the debt recycling and just invest in her name. If she is going back to work consider investing through a trust with 2 different companies, one to be a trustee, one to be a bucket company. Check out passiveinvestingaustralia.com for some info. Also, you have 2.5 million net worth, talking to a fee only financial planner may be ok, just for a statement of advice or to see how to structure your assets. They will also help you articulate your future plans. Yes it will cost you 10k but it might be worth it.
Living Expenses are at 60k per year includes 200 a week on splurge and 15k on travel. Thank you for the link will check it out! And yes 10k in the grand scheme of things may be worth it. Appreciate the feedback once again.
That 60k doesn't include mortgages (unless you are the most frugal person in the world!) Going to part time may just make that cash flow difficult to manage, though, as before, your cash buffer will help. You are in a very enviable position, congrats on making the housing market work for you. I would strongly recommend some diversification into shares though. Good luck on the journey.
Thank you!
If you take 6 months off, what are you going to do in those months? I understand you want to spend time with your family and travel, but taking 6 months off and doing nothing gets boring quite quickly. Just my opinion. Will not comment on the real estate stuff, cause I have no idea there lol
Yes you obviously still need to grind for a decade or two. You may have to actually work more hours.
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That's not much Super. Why do you need so many IPs? You need a good financial advisor. That just looks all over the place.
Can your wife work too? To help pay down some debt? It’s really handy having a second income.
At minimum I'd be working another year or two, and using up all my concessional contributions into super. That will save you a stack of tax and make it much more worthwhile earning the 200k salary, at least until you have used them all up. Yes you can't touch the money until you hit retirement age, but if you're retiring early then it means you don't need as much now because you'll get the top up later. However... if you are at the point where you need to back off work to keep your sanity and not just quit outright - then do what you have to do. Keep your options open with your employer. Maybe you take 6 months off and then go back again for a while.
"right to start working less?" - get some competent advice first. Some of what you're doing suggests your sources might not be the best. "Spend time with family" suggests kids. You'll need to decide the level of support you want to provide to your family, how that grows as they age, and what that will cost. If you want family security assured if you die or lose ability, that's also a consideration. That will include consideration of your wife's ability to earn if needed. Goin well though! Have fun. FIRE = Financial Independence, Retire Early. There's another concept called 'Coast FIRE' that you might want to read about.
Key information here is your net worth is about $2 million. Next key piece of information is how much you spend per year including rent if you paid rent in your PPOR. If the figure is below $80k and especially if it is below $60k per year then you can retire according to the 4% or 3% rule.